In-House vs Outsourcing HR: Advantages & Disadvantages

As more companies look to outsource facets of the business that aren’t integral to creating and distributing a product or service, you’ve likely heard about some that outsource human resources functions as well. Outsourcing in general has a lot of benefits—keeping headcount down, saving on training costs—but is outsourcing HR any different? 

HR is a multi-faceted department that plays a big part in building your teams, creating company culture, and maintaining workplace satisfaction. Not to mention its involvement in managing payroll, benefits, and other administrative responsibilities. Are those functions worth outsourcing to outsiders who don’t have a history with your business? For new businesses especially, this can be a daunting concept. 

In-house HR teams function differently business-to-business—and some businesses might not benefit from losing their in-house HR team. Let’s unpack some of the advantages and disadvantages of outsourcing HR functions to see if this might be a viable, beneficial option for you now or in the future.

What are the advantages and disadvantages of outsourcing HR functions?

What are the advantages of outsourcing HR services?

Relinquishing tax and payroll duties. For newer businesses especially, your focus and energy should be put towards making the business succeed within the market, not on administration and responsibilities like ensuring your team members receive payment on time. 

Managing recruitment and hiring. At the end of the day, it’s your responsibility to decide who you hire and bring onto the team. But there’s far more work in recruiting talent, organizing job postings, scheduling interviews, and keeping track of applicants. While you and your team might be hiring, there are  administrative responsibilities that could be outsourced.  

More resources. Even with a robust, diversified HR team, there are some potential HR needs that are better addressed with consultation or outsourced professionals. Succession planning, specific training initiatives, talent acquisition, etc., require HR personnel and a skillset that might not be readily available with your current, in-house team.  Teams without dedicated HR support will see a significant increase in resources available to them.

Cost. As your team grows and your HR needs become more nuanced, your company will require a higher level of HR talent – talent that comes at a price.  Proficient, highly-trained HR employees will require more monetary investment. When you work with the right outsourcing provider, you get the same talent and expertise at an affordable cost. 

Expert knowledge. HR outsourcing providers prioritize one thing: providing businesses highly-trained, expert-level HR talent. You are generally guaranteed veteran HR staffing that understands the complexities of operating in an outsourced environment. 

HR agility. One misconception about outsourcing is the belief that you’re required to outsource all or nothing—outsource the entire department, or nothing at all. That’s incorrect. Instead, a good outsourcing provider will help determine which specific HR functions would benefit from being outsourced. Maybe it’s just your onboarding or payroll processing that need assistance, and not other administrative tasks. Outsource what you need. 

What are the disadvantages of outsourcing HR services?

Distanced interaction. Anytime you introduce outsourcing into your business model, you run the risk of creating distance between you and your employees, if not done methodically and with the right intent. With outsourced HR functions, some employees might feel disenfranchised or distanced with that new change. 

Potential culture change. Often when efficiencies are implemented, some employees will feel left out or unheard. When you outsource the department responsible for acting as a liaison between employees and upper level management, you run the risk of a culture change. This can be mitigated by only outsourcing part of your HR responsibilities, or by finding a consultant that will work directly with your team and preserve the culture you have created. 

HR Turnover. When you work with HR outsourcing services, you won’t always deal with the same representatives. Your account will be assigned the same people, but depending on the whims of the provider, you might not see the same tenure you would in hiring full-time HR employees yourself.  However, talk to prospective consultants to find out their approach to employee communication. Do your employees have one main contact? Are they provided a general service email address or phone number? Understanding how consultants view customer service is an important part of determining if HR outsourcing is for you. 

Is it better to outsource HR?

Each business will have different HR needs—whether outsourcing or keeping those responsibilities in-house. That’s dependent on your size, culture, and the nuances of your business. There are real benefits and advantages for outsourcing HR, including cost-savings, expert knowledge, and agility to meet specific needs, but much of that is dependent on the HR outsourcing provider you work with. 

Milestone understands how precarious outsourcing HR needs can be for businesses. That’s why their team is skilled and collaborative, and works hard to ensure the HR functions you need to outsource are met with the right people. Highly trained, specialized, and well equipped with the resources to help your business, contact Milestone to learn how they work with clients to achieve the best outsourcing results.